Commentary on Political Economy

Thursday, 6 October 2011

Trick Or Trite, Trite Or Tripe: Bill Gross’s Version of Underconsumptionism

Friends will find amusingthe regularity with which Bill Gross of PIMCO keeps backing the wrong horse in terms both of analysis and of investment advice – only days after we have argued for the exact opposite! You will recall that this happened with regard to Treasuries in April (Gross argued that they were headed south in his April newsletter just weeks after we had screamed out our reasons why capitalists had “nowhere else to go” except to seek refuge in government bonds, though not of the EU type) and again in June when he advised investors to sell dollars just as we were arguing for dollar strength given the disastrous debacle in Europe and a fresh global recession.

Now Gross is at it again! Only days after we exposed the intellectual bankruptcy of “underconsumption theories”, Gross in his October newsletter argues for…. Guess what? Yet another version of “under-consumptionism”! Here is Gross, and the link:

“Long-term profits cannot ultimately grow unless they are partnered with near equal benefits for labour. Washington, London, Berlin and yes, even Beijing must accept this commonsensical reality alongside several other structural initiatives that seek to rebalance the global economy. The United States in particular requires an enhanced safety net of benefits for the unemployed unless and until it can produce enough jobs to return to our prior economic model, which suggested opportunity for all who were willing to grab for the brass ring – a ring that is now tarnished if not unavailable for the grasping. Policies promoting 'buy American' goods and services – which in turn would employ more Americans – should also be reintroduced. China and Brazil do it. Why not us?....

There are no double-digit investment returns anywhere in sight for owners of financial assets. Bonds, stocks and real estate are in fact overvalued because of near zero per cent interest rates and a developed world growth rate closer to 0 than the 3-4 per cent historical norms. There is only a New Normal economy at best and a global recession at worst to look forward to in future years. A modern day, Budweiser-drinking Karl Marx might have put it this way: “Labourers of the world, unite – you have only your six-packs to lose.” He might also have added, “Investors and policymakers of the world wake up – you’re killing the proletariat goose that lays your golden eggs.”

As you can see, Gross is implying that there is a magic level of “workers’ share of income” below which capitalist investment will become unprofitable because workers will not have the income to consume their own product! Could anyone ever concoct more miserable a travesty of sense and logic than this pathetic poltroon of the bourgeoisie? It ought to be the Eleventh Commandment or else a cardinal sin that anyone believe any such tripe! The exclusive aim of capital is one and one only! Namely, to reduce the “workers’ share of income” to zero if at all possible! Gross is quite right to stress that the real source of the GFC is – exactly! – the decline in the profitability of global capitalism. But only a donkey or a pea-brained moron such as he could come up with the preciosity about lower profitability being caused by insufficient wages and therefore lack of demand for consumption of capitalistically-produced goods!!

Once again, as friends would know from reading this site, the decline in profitability can be due to one thing and one thing only! That despite the decline in the workers’ share of “income” the command of capital over living labour has been declining – with the consequence that capital has been unable to extend its political control over workers and the rest of the society of capital due to the antagonism of workers and the subaltern social classes! Why and how this has happened will be the subject of our future interventions.